August 2025 Regulatory & Legislative Update 

This regulatory and legislative update covers issues involving the July 4th Act, the Consolidated Appropriations Act, health plan parameters for 2026, and more.

The July 4th Act – Points to Ponder

On July 4, 2025, President Trump signed HR1, popularly referred to as the One Big Beautiful Act (OBBA). For an initial summary of the benefit-related provisions of this law, see our prior Benefit Beat article here. Following are some points to ponder for employers considering making changes in response to this law. Thus far, little to no guidance has been provided and much is needed, therefore, stay tuned for further developments.

Employer Benefit Opportunities Related to the July 4th Act

HSA Compatibility

Telehealth

If a telehealth plan is adopted, consider:

• Whether to make it retroactive to January 1, 2025
  • Would require reprocessing health plan claims previously submitted
• Adopting on a prospective basis, such as January 1, 2026

Direct Primary Care

If the intent is to adopt a direct primary care arrangement:

• Develop a relationship with a primary care provider
• Ensure that monthly costs of such an arrangement do not exceed $150 ($300 for family coverage) subject to cost-of-living adjustments
• Make certain that the direct primary care relationship is limited to primary care
• Make certain it does not cover impermissible expenses, such as:
  • Anesthesia
  • Prescription drugs (other than vaccines); and
  • Laboratory services not typically provided in an ambulatory primary care setting
• Watch for guidance for further definition of direct primary care

Be aware that bronze or catastrophic coverage purchased through the marketplace is HSA compatible effective January 1, 2026.

Dependent Care Assistance

If you offer a dependent care assistance plan, be aware that the calendar year maximums will increase to $7,500, up from $5,000, and $3,750, up from $2,500 (for married couple filing separately), for taxable years beginning in 2026. Plans may choose to adopt these higher limits, however, there is no requirement to do so. If a plan does elect to adopt the higher limits:

• Be aware of the potential impact to the dependent care discrimination testing standards
  • The 55% average benefits test is perennially difficult to meet
  • Consider limiting highly compensated individuals to a lower dependent care assistance amount
• Once a determination is made about whether to make any changes, amend the dependent care assistance plan accordingly

Educational Assistance Plan

• If you offer, or intend to offer, an educational assistance plan, make sure you have a written plan document
• Determine whether you want to offer qualified student loan reimbursement as a permissible benefit
  • If so, include in plan document
• Be aware that the $5,250 reimbursement amount will be tied to a cost-of-living adjustment beginning January 1, 2027
• If your intent is to always offer the maximum amount allowed by law, consider language such as maximum amount permitted by law

Extension of Tax Credit for Family Leave

If you offer paid family leave, be aware that a tax credit is available as long as certain criteria are met. This credit is now made permanent. An employer is eligible for a general business tax credit under Code § 45S if it has a separate written policy in place that allows all qualifying full-time employees a minimum of two weeks of annual paid family and medical leave. It is important to note that this credit is available to an employer without regard to whether it is subject to the federal Family and Medical Leave Act (FMLA), as long as the employer maintains the written policy that meets the wage payment criteria. 

• Be aware that the credit can be taken against wages paid
• The credit can also be taken against insurance premium for purchase of a paid family leave insurance policy

In states in which paid family leave is required, be aware that the federal tax credit can only be taken for benefits that exceed the state paid leave requirement.

Trump Accounts

The law provides for a new savings option known as a Trump Account. It is specifically for children under the age of 18 and would allow the taxpayer and others to contribute (after tax) up to $5,000 per year, tied to cost-of-living adjustments annually. Additional information on these contributions can be found in Code § 530A. In addition, a pilot project has been established that provides for a one-time $1,000 contribution from the government for each child born between January 1, 2025, and December 31, 2028.

An employer may, but is not required to, participate in Trump Accounts. If an employer chooses to participate, it must:

• Have a written plan document
• Comply with non-discrimination rules, similar to those applicable to dependent care assistance plans
• Employers may contribute up to $2,500
  • Code § 128 provides additional details for employer contributions

It is unclear at this point whether this is a one-time contribution. Further, it is unclear whether the employer contribution amount is per child or only for one child per family. Employer contributions are not included in the employee’s gross income. These accounts are a deferred tax savings program, meaning the earnings accrue tax deferred and are taxed upon distribution.

Further guidance on these accounts is expected and should provide additional details. Another important piece of guidance that would be useful, particularly as it relates to employer contributions, is the application of ERISA. These types of accounts cannot be established until July 2026; additional guidance may be available by that time.

Changes to Taxes on Overtime and Tips

Under the new law, eligible employees that receive overtime will be able to deduct up to $12,500 of their overtime pay per year ($25,000 for joint filers). To take the deduction, employees subtract the applicable amount from taxable income when filing individual tax returns. The deduction applies to qualified overtime, which is overtime paid out in accordance with the Fair Labor Standards Act and does not apply to voluntary overtime or overtime that is required as part of a collective bargaining agreement. Further, individuals considered highly compensated are exempt and high earners are phased out. The income threshold is $150,000 ($300,000 for joint filers). To comply with this portion of the new law, employers need to:

• Keep accurate records on overtime
  • Errors may result in compliance violations
• Use a good faith method in determining 2025 overtime paid
• Report deductible overtime on employee’s W-2 forms
• Continue withholding at current rates
  • Applicable payroll taxes still apply, i.e., social security, Medicare and state tax withholding

Additional guidance is expected from the IRS. The law also provides for a deduction on tips earned in an occupation that regularly received tips prior to 2025. The deduction is only available for discretionary tips – it does not include service fees or mandatory tips. The government is expected to issue guidance with a list of occupations that are eligible for the tip deduction by October 2, 2025. The deduction is capped at $25,000 per year and phases out for high earners, and the income threshold is the same as the threshold for the overtime deduction. For 2025 tax filing, taxpayers will claim the deduction when they file their taxes. In subsequent years, the deduction is applied as a tax withholding on each paycheck. 

The deductions on overtime and tips are available from January 1, 2025, through December 31, 2028.

Qualified Transportation Items Permanently Repealed

Tax-favored status of employer-provided moving is permanently repealed with limited exceptions for the military and the FBI. In addition, the tax-favored bicycle benefit is permanently removed from the qualified transportation benefit. The remaining programs – qualified parking, mass-transit, and vanpooling – have a monthly benefit limit of $325 for 2025.

The Emergency Services Quandary Continues

The Departments of Labor, Health and Human Services, and the Treasury, with the Office of Personnel Management (the “Departments”) have jointly released FAQs About Consolidated Appropriations Act, 2021 and Affordable Care Act Implementation Part 71 (“FAQs Part 71”), providing good faith guidance will continue for another six months. 

As background, individuals cannot be balanced-billed; they can only be charged in-network rates in three instances (use of an out-of-network healthcare provider due to an emergency, out-of-network provider in an in-network facility, or air ambulance) for the services received. The payor, health plan or insurer, and provider are then left to determine how the so-called balanced bill will be resolved. This quandary has resulted in significant litigation. Currently, the Fifth Circuit is rehearing the matter en banc, vacating its previous October 30, 2024, order.

In the meantime, the Departments will extend existing discretion allowing payors and providers to calculate QPAs using a good faith interpretation of prior guidance to resolve difference of view on the appropriate payment amount, thus relieving entities from having to make multiple changes to their processes while awaiting the Fifth Circuit’s determination. For additional information, see our prior Benefit Beat article on FAQs Part 69 here. 

2026 – Health Plan Parameters

The Internal Revenue Service (IRS) has issued Revenue Procedure 2025-26 providing the employer shared responsibility indexed penalty amounts for calendar year 2026. 

As a reminder, the 4980H(a) penalty applies if an employer subject to employer shared responsibility (fifty or more employees) does not offer minimum essential coverage to at least 95% of its full-time employees. The 4980H(b) penalty applies if an employer subject to employer shared responsibility does not offer adequate affordable coverage.

2026 Affordability Standards and ACA Out-of-Pocket Limits

In Revenue Procedure 2025-25, the Internal Revenue Service released certain affordability standards for 2026 as they apply to the Affordable Care Act (ACA), as follows:

Affordability Standard – Employer Shared Responsibility Mandate

Coverage under an employer-sponsored plan is deemed affordable to a particular employee if the employee’s required contribution to the plan does not exceed 9.96% (plan years beginning in 2026, up from 9.02% for 2025) of the employee’s household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan.

As background, employers subject to the ACA’s employer shared responsibility mandate who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace. If an employer does not know an individual’s household earnings, it can use one of the following three safe harbors for purposes of determining affordability:

1. A Form W-2 determination, in which the employer’s lowest cost, self-only coverage providing minimum value does not exceed 9.96% (for 2026 plan year; 9.02% in 2025) of the employee’s Form W-2 wages (Box 1) for the calendar year.
2. A rate of pay method, in which the minimum value cannot exceed 9.96% (for 2026 plan year; 9.02% in 2025) of an amount equal to 130 hours, multiplied by the employee’s hourly rate of pay as of the first day of the coverage period. For salaried employees, the monthly salary is used instead of the 130-hour standard. An employer can apply this method to hourly employees if they experience a reduction in pay during the year; however, this methodology cannot be used for commissioned salespeople.
3. A Federal poverty line (FPL) standard, in which cost of single coverage does not exceed 9.96% (for 2026 plan year; 9.02% in 2025) of the individual federal poverty line rate for the applicable calendar year, divided by 12.

For 2026 calendar year plans, the maximum an employee can be required to pay for single coverage is $129.89. Federal poverty level guidelines for 2026 will likely be issued in January of 2026, which could impact affordability for non-calendar year plans. 

Premium Tax Credit

The following contribution percentages are used to determine whether an individual is eligible for a premium tax credit for health coverage purchased through the marketplace for the 2026 tax year:

Out-of-Pocket Limits

Previously, cost-of-living adjustments for health savings accounts (HSAs), excepted benefit health reimbursement arrangements (EB-HRAs), and ACA out-of-pocket limits were released. For additional information, see our past Benefit Beat articles: HSA and EB-HRA Cost of Living Adjustments for 2026 and July 2025 Regulatory & Legislative Update . Please note the revised ACA out-of-pocket limits below. These amounts have increased since they were originally released and included in the May Benefit Beat.

Health Savings Accounts (HSAs)

• Catch-up contributions for people aged 55 or over remain unchanged at $1,000
• The contribution limit applies to the 2026 calendar year
• The HDHP deductible and out-of-pocket limits apply to plan years beginning in 2026

CA Out-of-Pocket Limits

(for marketplace insured plans and non-marketplace insured and self-funded plans)

Excepted Benefit Health Reimbursement Arrangements (EB-HRAs)

• The annual cap applies to plan years beginning in 2026

Premium Assistance Under Medicaid and the Children’s Health Insurance Program (CHIP)

Individuals who are eligible for employer-sponsored group health coverage but are unable to afford the premium may be eligible to receive premium assistance from a state’s Medicaid agency or Children’s Health Insurance Program (CHIP).

The Children’s Health Insurance Program Reauthorization Act (CHIPRA) requires employers that maintain group health plans in states that provide premium assistance subsidies to provide health plan participants with notice of the availability of these programs.

Employers can provide the notice:

• With the summary plan description
• With the open enrollment materials
• With materials notifying the employee of their health plan eligibility
• As a separate document

The notice explaining the right to premium assistance must be provided to employees residing in the listed states at least once annually, without regard to where the employer is located, or where the health plan is situated. Failure to provide notice of this premium assistance opportunity can result in a penalty assessment of $145 per day per employee (indexed for 2025).

Employers can use (1) the model notice as is, (2) a modification of the model notice, or (3) their own notice, so long as the notice provides at least minimal information about how to contact the relevant state Medicaid or CHIP office. The notice can be provided in written form or electronically, in compliance with the DOL’s electronic disclosure rules.

States with Premium Assistance under Medicaid and the Children’s Health Insurance Program (CHIP):

• Alabama
• Alaska
• Arkansas
• California
• Colorado
• Florida
• Georgia
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Massachusetts
• Minnesota
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New York
• North Carolina
• North Dakota
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

No new states have been added to this list from the last update.

Filing Relief for Disasters Act

Historically, and in response to federally defined disasters such as hurricanes, floods, etc., temporary filing extensions are given for certain required obligations such as 5500 filings, among others. On July 24, 2025, the Filing Relief for Natural Disasters Acts became law. This law provides that this type of disaster relief can also be granted for state determined disasters, thus relieving the obligation to wait for a federal determination. Further, the law expands the disaster relief extension from 60 days to 120 days. While we hope no one needs to avail themselves of this relief, it could be useful in the event of future disasters.

Missouri Earned Sick Time Law Repealed

The rocky road of Missouri earned sick time comes to an end on August 28^th, at least for now. On July 10, Governor Kehoe signed HB 567 repealing the earned sick time law. Importantly, employers subject to the law must comply and sick time must be accrued and available for use from May 1^st through August 27^th. Whether unused accruals must be available for use after this 17-week period remains an open question. The answer may depend on what the employer’s leave policy states. The employer will also want to consider employee relations implications.  

As a reminder, the law allows eligible employees to earn one hour of earned sick time for every thirty hours worked, up to 56 or 40 hours per year depending on employer size. See prior Benefit Beat articles:
Missouri Earned Sick Time in Effect for Now
Missouri Earned Paid Sick Time, An Ongoing Saga
Voters Pass Paid Sick Leave Laws in Missouri, Nebraska, and Alaska.

Employers will want to review how they have chosen to implement the sick time benefit with particular attention to whether they have reserved the right to modify their sick time policies. If the employer has reserved this right to make changes, it will then need to decide whether it wants to stop providing sick time as of August 28 or whether it intends to continue providing sick time. The employer would of course have the right to provide the sick time in any allotments and under any conditions that it chooses, again, assuming it has reserved the right to make these changes.

The Missouri Department of Labor and Industrial Relations has updated its FAQs (specifically Q1) to address the repeal of the earned sick time law. While this may be the end of the road for now, it appears that this issue might return in the November 2026 election cycle, during which Missourians could again have the right to voice their views on paid sick leave. It will be important for Missouri employers to keep an eye on developments.

Maine’s Earned Paid Leave Clarified

On July 1, 2025, Maine Governor Janet Mills signed a law increasing the number of hours of earned paid leave an employee must be able to accumulate year-over-year. This increase in leave takes effect September 24, 2025.

As background, Maine’s paid leave for any reason law took effect January 2021. The law applies to employers employing 10 or more employees and requires an employee to accrue up to 40 hours of earned paid leave each year. The law allows carryover of accrued and unused earned paid leave from year to year but is limited to 40 hours.

Beginning September 24, 2025, accrued and unused earned paid leave carried over from the previous year of employment may not reduce the total amount of earned paid leave an employee is entitled to accrue in the current year of employment (40-hour carryover plus a new 40-hour accrual). It is unclear whether an employer can still limit the use of earned paid leave to 40 hours per year. Hopefully, future guidance will clarify this.

New Hampshire’s Child-Related Leave

Beginning January 1, 2026, employers employing 20 or more employees must allow an employee up to 25 hours of unpaid leave to attend the employee’s own medical appointments for childbirth, postpartum care, or for the child’s medical appointments during the first year following birth or adoption. 

If the same employer employs both parents, the parents can be limited to a total of 25 hours to be shared between them.  

While the leave need not be paid, an employee may substitute available accrued vacation or other accrued paid leave. When the employee returns from taking leave, the employer must restore the employee to their original job.

An employee wanting to use this leave must provide reasonable notice to the employer prior to the leave and make a reasonable effort to schedule the leave so as not to unduly disrupt the operations of the employer. An employer may ask for documentation from the employee to ensure the time is being used for its intended purpose.

Oregon’s Blood Donation Leave

Beginning January 1, 2026, employees may use paid sick time for blood donation connected with a voluntary program approved or accredited by the American Association of Blood Banks or American Red Cross. 

Under Oregon’s sick time law, employees working for employers employing 10 or more employees earn up to 40 hours of paid sick time per year. For employers with 9 or fewer employees, sick time is protected but unpaid. Additional information as well as FAQs are available on the Bureau of Labor and Industries website. 

Rhode Island Requires Reasonable Accommodations for Menopause

Rhode Island’s Fair Employment Practice Act requires employers employing four or more employees to provide reasonable accommodation related to pregnancy, childbirth, or a related medical condition, including lactation or the need to express breast milk for a nursing child. 

Effective June 24, 2025, the law is amended to require employers to also provide reasonable accommodation for an employee’s menopause or related condition, including the need to manage the effects of vasomotor symptoms.

This amendment requires employers to display and distribute an updated written notice of employee rights. The updated notice must be conspicuously posted in the workplace in an area accessible to employees and provided to all employees upon hire and within 10 days of an employee notifying the employer of her pregnancy or menopause. 

Washington’s Domestic Violence Leave Law Expanded

Washington’s domestic violence leave law applies to employers with one or more employees and allows an employee to take a reasonable amount of unpaid leave if the employee or the employee’s family member is a victim of domestic violence, sexual assault, or stalking. 

Beginning January 1, 2026, the law is expanded to cover victims of a hate crime. Hate crime means the commission, attempted commission, or alleged commission of an assault, physical damage to or destruction or property, or threats to a specific person or group of persons, including offenses committed through online or internet-based communication.

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.